How Trump's son-in-law helped salvage the North American trade zone

OTTAWA/WASHINGTON (Reuters) - Robert Lighthizer was the public face of arduous, year-long talks to rework NAFTA, but as he savoured a successful conclusion in the White House Rose Garden on Monday, the U.S. trade representative singled out another man as the deal’s architect.

“I’ve said before, and I’ll say again, this agreement would not have happened if it wasn’t for Jared,” Lighthizer told reporters.

The 70-year-old veteran negotiator was referring to Jared Kushner, more than 30 years his junior and Donald Trump’s son-in-law, whom the president had asked to help out on trade early in the presidency, especially on Canada and Mexico.

While Kushner’s time in the White House has been turbulent - Chief of Staff John Kelly temporarily stripped him of his security clearance this year and he has been criticized for his dealings with the Middle East - his role in keeping the North American Trade Agreement afloat was fundamental, multiple sources said.

A 37-year-old real estate tycoon married to Trump’s daughter Ivanka, Kushner has the trust of his father-in-law, and crucially, is close to Lighthizer, a Canadian source with knowledge of the talks said.

His friendship with Mexican Foreign Minister Luis Videgaray, whom he knows through Wall Street connections, helped defuse several blowups in that relationship and get a U.S.-Mexican deal over the finish line in August, another source close to the talks said.

“The deal fell apart more than once. And in every occasion it was one person that always found a way to put it back together: Jared Kushner,” Videgaray told Reuters.

Kushner’s help in the new United States-Mexico-Canada Agreement (USMCA) could pay dividends down the road.

Kushner, who travelled to China with Trump last year, has a good relationship with the Chinese ambassador to the United States, Cui Tiankai, said a source familiar with the situation. That may be useful when Trump moves to cool his trade war with the Asian nation.

The Trump administration slapped tariffs on $200 billion of Chinese goods last month and is threatening duties on virtually all of the goods China exports to the United States. On Monday, flanked by Lighthizer and Kushner in the Rose Garden, the president said “it’s too early to talk” to China.

Michael Pillsbury, a China expert and former national security official who served on the Trump transition team, said the new deal could encourage China to negotiate, but could also raise fears the United States was trying to contain it.

“Kushner’s contacts with the Chinese ambassador and his skill at diplomacy can certainly help reduce Chinese paranoia and hopefully coax them into making their first negotiating offer,” said Pillsbury, currently at the Hudson Institute.

TOXIC MOOD

From early on in the negotiations, two of Canadian Prime Minister Justin Trudeau’s most trusted advisers - chief of staff Katie Telford and private secretary Gerald Butts - also forged ties with Kushner, Hassan Yussuff, president of the Canadian Labour Congress, said in a telephone interview. Yussuff was part of the NAFTA advisory council for Chrystia Freeland, Canada’s lead negotiator in the talks and the country’s foreign minister.

A second Canadian source said Telford and Butts flew to Washington to meet Kushner in the early days of the presidency.

Those connections came to the fore again last week, when the mood became toxic between Lighthizer and Freeland, as the U.S.-imposed Sept. 30 deadline to conclude the talks loomed.

A third Canadian source directly familiar with the talks said the Americans “were incensed” when Freeland took part in a Toronto panel entitled “Taking on the Tyrant,” which featured derogatory comments about Trump.

Trump summed up the atmosphere in typically blunt fashion, saying on Wednesday, “We don’t like their representative very much,” as the Canadian team dug in on the issue of U.S. access to Canada’s dairy market.

“There was a moment where the traditional channels of negotiations appeared to break down because they just could not get through some of the largest issues, dairy being one of them,” said a person in Washington familiar with the situation.

Kushner kept talking to Butts and Telford, and on Thursday a message got through that the United States wanted to know what was non-negotiable for Canada. The answer went back that Chapter 19, a dispute resolution mechanism, was a red line.

By Friday morning it was clear the Trump administration was not going to fight for Chapter 19 anymore - “the Americans blinked,” said a fourth senior Canadian source with direct knowledge of the talks.

“I don’t think the administration itself was that hung up on (Chapter) 19, I think Robert Lighthizer was,” Yussuff said.

The breakthrough triggered concessions from Trudeau’s team, most importantly on dairy. The fourth Canadian source described the thinking as “better get dairy out of the way now” rather than negotiating from a weaker position if talks failed and Trump hit them with 25 percent auto tariffs, the stick he had used to hurry along talks with Mexico and Canada since May.

On Friday, Kushner got Lighthizer on a conference call with Telford and Butts. “Together the four of them worked through some of the outstanding issues and that led to a breakthrough in the negotiations, ultimately leading to the success of the deal,” said the person in Washington.

With a deal in sight, Mexico and the United States cancelled plans to publish on Friday evening the text of their bilateral deal to give Canada the chance to join by the Sunday deadline.

The talks intensified, with Telford “talking on the phone the entire time,” in the end with Kushner, said the fourth Canadian source.

The offices of Freeland and Trudeau did not respond to requests for comment. The White House declined to comment.

INTENSIFYING EFFORTS

It was by no means a foregone conclusion that NAFTA would survive. After demanding early last year that it be reworked in favour of the United States, Trump repeatedly threatened to toss in the trash the $1.2 trillion, quarter-century-old agreement.

Tensions between the United States and Canada started at the top, with relations strained between Trump and Trudeau after acrimonious talks in Quebec City in June at a G7 summit.

“There was a lot of tension, I will say, between he and I - I think, more specifically,” Trump told a news conference on Monday. “You know when it ended? About 12 o’clock last night.”

At every slump in the talks, which began formally in August last year, multiple players helped stabilize the situation. One of the hairiest moments was in April last year, when trade experts say Trump was close to triggering U.S. withdrawal from NAFTA, prompting frantic lobbying from business groups.

Trump changed his mind, according to one source close to the talks, only after agriculture minister Sonny Perdue showed the president a map including all the Trump-supporting, farming states that would suffer lost exports if NAFTA collapsed.

The United States Department of Agriculture did not respond to a request for comment about this incident, which has been previously reported by Reuters and other media.

Similarly, there was more to bringing the talks to a last-minute finale than just Kushner’s efforts. Outside factors were also pushing all sides toward a deal.

In the weeks following the announcement of the Mexico-U.S. deal, U.S. and Mexican officials increasingly understood a new trade accord might not pass Congress without Canada on board, said one U.S.-based source familiar with the process.

FILE PHOTO: White House senior advisor Jared Kushner listens as U.S. President Donald Trump speaks at a dinner to honor evangelical leadership in the State Dining Room at the White House in Washington, D.C., U.S. August 27, 2018. REUTERS/Leah Millis

Anxious to avoid being left with nothing, Videgaray and Economy Minister Ildefonso Guajardo, Mexico’s lead in the negotiations, worked behind the scenes to “triangulate” communication between the Canadians and the Americans to try to land the deal, the source said.

Videgaray’s relationship with Kushner was a safety valve that lowered tensions between Freeland and Lighthizer, the source said. Another source said Guajardo offered Freeland advice on the sidelines of the United Nations General Assembly last week about negotiating bilaterally with Lighthizer.

In the end, the talks went down to the wire, with Kushner abandoning plans to spend the Jewish festival of Sukkot with his family late on Sunday, the person in Washington said, as Canada and the United States thrashed out the last details of a deal. It was finally announced at 11:35 p.m. EDT (0335 GMT), just 25 minutes before the deadline.

Reporting by David Ljunggren and Steve Holland; additional reporting by Roberta Rampton in Washington, Dave Graham and Frank Jack Daniel in Mexico City; writing by Frank Jack Daniel; editing by Leslie Adler and James Dalgleish